Chapter 14: Ownership and Risk of Loss in Sales
1. Any person who innocently buys stolen goods from a thief receives title as well as possession.
2. For ownership of goods to be transferred in a sale, the goods must be both existing and identified to the
transaction.
3. Unless prohibited by the terms of the sale, the seller may identify the goods as the subject matter of a
particular sales contract.
4. Unless goods are both existing and identified to the contract, they are categorized as future goods.
5. Neither ownership nor risk of loss passes at the time of the contract for the sale of future goods.
6. When a bulk transfer is made, the UCC requires notice be given to the buyer’s creditors.
7. An innocent third party who in good faith buys some or all of the goods from a bulk transferee cannot get a
good title.
8. Auction sales are “without reserve” unless specifically announced in advance to be “with reserve.”
9. By nature or trade usage, each unit of fungible goods may be regarded as equal to every other unit.
10. A fractional interest in a single good that is to remain undivided is not a valid sale under the UCC.
11. Transfer of ownership of goods may be done by the owners and authorized persons, or _____
A. by merchants with possession of sold goods.
B. by holders of negotiable documents of title.
12. A good-faith purchaser is one who _______________
A. purchases materials for religious organizations.
B. charges goods on faith that the money will be provided.
13. Goods specifically designated as the subject matter of a particular sales contract could have been identified
by _______________
A. the buyer.
B. the seller.
14. If the parties do not specify when the title is to pass, the courts will _______________
A. determine if there is any applicable custom or usage in the particular trade that can settle the question.
B. look to the UCC for a solution.
15. Future goods are _______________
A. both existing and identified.
B. window display items indicating what is to come.
16. If the seller ships goods by carrier, the transfer of the risk of loss from seller to buyer
occurs _______________
C. upon payment.
D. none of these.
17. An insurable interest arises in the buyer at the time _______________
C. the risk of loss transfers to the buyer.
D. all of these
18. In COD sales, _______________
C. the carrier has control over the goods until delivery.
D. none of these.
19. If a buyer of a bulk transfer fails to notify the seller’s creditors of the forthcoming transfer, the creditors may
_______________
C. either a or b.
D. none of these.
20. In a sale on approval, ownership and risk of loss do not pass to the buyer until _________
A. the buyer pays for the goods.
B. the buyer keeps the goods beyond a reasonable time.
21. Kenny operates an electronics components business in a foreign country and frequently ships the
merchandise to the United States. Which of the following statements is not true if his CIF quote is accepted?
C. The risk of loss passes from him to the buyer when the buyer receives the goods.
D. both a and c
22. In a COD transaction what right does the buyer lose?
C. the right of ownership and risk of loss
D. none of these
23. Which of the following is not an example of a fungible good as defined by the UCC?
C. grade A eggs
D. all of the above are fungible goods
24. Helena examines countless catalogs and pinpoints several wedding dresses that she likes. After discussing
the various dresses with her maid of honor, she determines the dress she wants to purchase. She calls the
company, gives the sales representative her measurements, and specifies material type, color of fabric, and
delivery date, and then pays by her charge card. The wedding dress is an example of a(n) _______________
C. fungible good.
D. none of the above.
25. Tomas and Sandra visit a local nursery in order to purchase trees, shrubs, flowers, and lawn furniture for
their backyard. They find the items they want and pay for them with a personal check. Which of these
statements is true regarding sales transactions paid for by check?
A. checks are considered legal tender
B. check payment does not constitute a cash-and-carry sale
26. Drew owns and operates a glass-blowing shop. According to the UCC, what must Drew do if he decides to
sell his complete inventory of glass including glass-making supplies and glass-making equipment?
A. notify all his creditors
27. Mei-yu agrees to purchase a brown leather briefcase and have it delivered to her office on a 30–day trial
basis. At the end of the 30-day period she has the option of either paying for the item or returning it to the seller.
This type of transaction is known as _______________
A. a sale on satisfaction.
B. a sale on approval.
C. are under a court order such as a sheriff.
D. are empowered by statute.
29. The holder of a negotiable warehouse receipt has _______________
A. possession and title of the goods.
B. possession and risk of loss of the goods.
30. FOB means _______________
A. Freight on Board.
B. Free on Boat.
31. Melody has purchased 20 crates of fabric for use in her interior design company. Because her store is small,
the crates of fabric will be stored temporarily in a public warehouse. In this situation the public warehouse is
a(n) ____________________ of the fabric.
32. Jake possesses a negotiable bill of lading for 400 golf bags, which he transfers to Mike. In regard to the bill
of lading, both Jake and Mike would be termed a(n) ____________________ while each was in possession of
the document.
33. CIF stands for ____________________.
34. After Lora’s mother died, the expensive items in her mother’s estate were placed in a public sale and sold to
the highest bidder. This type of sale is known as a(n) ____________________.
35. Ray agrees by phone to purchase a metal detector from Lloyd’s Treasure Shop catalog at a price of $325.
Ray needs the metal detector as soon as possible, but he has no credit available with which to purchase the item.
As a consequence, Lloyd’s arranges for the metal detector to be delivered but, at the time of delivery, Ray will
have to pay in cash the $325 plus shipping costs. This is a type of sale called _________________________.
36. Charles owns several pieces of matching highly valuable antique, turn-of-the-century furniture. He wants to
sell the furniture and has stipulated that all the pieces of the furniture set are to remain together. This type of
sale is known as a sale of a(n) ____________________ interest.
37. While working as a shipping and receiving clerk for a wholesale furniture manufacturer, Manuel illegally
obtains numerous pieces of living room and dining room sets. He then misrepresents himself as the owner of the
sets of furniture and sells them to his neighbor, Jensen. Jensen knows nothing of the theft and has no grounds to
38. Airbills, ship’s bills, and bills of lading convey title to goods in storage and/or in transit and are issued by
public transporters of goods called ____________________.
39. A sale “on trial” or “on satisfaction” is also known as a sale ____________________.
40. If an auction sale is conducted ____________________ the auctioneer cannot withdraw the goods and must
sell them to the highest bidder.
41. Fran had the motor in her car replaced at Fred’s Fix-It Auto Shop. Two weeks later the police confiscated
her car, as it contained a stolen motor. Does Fran have ownership because she was not aware of the crime?
Explain your answer.
42. Maria ordered a 35-mm camera, carrying case, and 10 rolls of film from Camera Outfitters at the price of
$229. Because she has no credit cards, Maria agrees to have the merchandise shipped COD. Therefore, upon
delivery to her residence, Maria will pay the delivery service $229 in cash plus an additional $18.65 for the
shipping. When does ownership and the risk of loss occur with this type of transaction? What are the
advantages and disadvantages of COD to Maria?
COD means “collect on delivery.” The carrier or delivery service collects the price and transportation charges